“Industrial production increased by 0.2% MoM in October, from a 1.1% MoM decline in September. On the year, industrial production remained unchanged. Looking at the details, bright spots were in capital goods sector (+2.7% MoM) and manufacturing (+0.7% MoM). At the same time, intermediate goods dropped by 1.1% and production in the energy sector dropped by almost 6% MoM. With today’s numbers, it is obvious that the summer weakness of the German industry was more substantial than only a vacation-driven soft spell.”
“On Friday, new orders data already provided some small relief for the industry, increasing for the first time after a three-months consecutive decrease. Still, despite the October increase, new orders are still far below their early-summer levels, adding to evidence that the industry’s safety net of low inventories and filled order books has become thinner. Somehow, the weak euro and extremely favourable financing conditions have not fully deployed their full impact on the economy, yet.”
“Looking ahead, the industrial weakness is not a problem for the German economy. At least not for now. In fact, domestic demand on the back of low interest rates, low inflation, higher wages and a strong labour market has become and should remain an important growth driver going into 2016. In addition, the service industry also enjoys much higher confidence than the manufacturing sector.”
“To some extent, the German economy currently sees the same underlying shifts as the Chinese economy. In the short run, this shift clearly helps cushioning the negative impact from external shocks. Whether this shift, however, will also be a guarantee for success in the longer run is a different kettle of fish.”
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